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State Examiner Directives

A Directive is a pronouncement by the State Board of Accounts (the Board) that sets forth a policy or procedure that the Board will use to enforce a law or Uniform Compliance Guideline (UCG) to conduct audits, and to carry out its duties as set forth by the Indiana legislature. A Directive is based on the general authority of the Board to carry out its responsibilities under IC 5-11-1 and other laws, and may be a form of the UCGs authorized by IC 5-11-1-24. The Board has the authority to direct public officers in keeping the accounts of their offices, including the use of forms, records, and systems of accounting and reporting adopted by the Board. A person who refuses to follow a Directive is subject to a civil action for an infraction.

You can find PDF versions of State Examiner Directives on this page.

  • 2018

    Directive 2018-1, Monthly and Annual Engagement Uploads

    Directive 2018-2, Motor Vehicle Highway Account

    AMENDED STATE EXAMINER DIRECTIVE 2018-1


    Date:    November 9, 2020

    Subject:    Monthly and Annual Engagement Uploads

    Authority:    IC 5-11-1-2, -4, -9, -10, -21, -24

    Application:    This Directive applies to all local governmental units

    From:    Paul D. Joyce, CPA, State Examiner


    The purpose of this Directive is to provide guidelines for the use of the "Indiana Gateway for Government Units" application entitled "Monthly and Annual Engagement Uploads (Engagement Uploads). The Engagement Uploads provide a more efficient and cost-effective audit process for governmental units.

    This amended directive is effective starting with December 2020 monthly files. The upload of December 2020 monthly files will be due February 15, 2021, and by the 15th of each month thereafter unless the State Board of Accounts (SBOA) establishes a different date. This is effective for 2020 annual files which will be due for upload March 1, 2021, for calendar year end units. For schools and extra-curricular accounts, this is effective for year ending June 30, 2021, which will be due August 29, 2021. Thereafter, annual files must be uploaded no later than March 1st (August 29th for schools and extra-curricular accounts) for the prior year end unless the SBOA establishes a different date.

    All counties, cities, towns, townships, libraries, schools and special districts will use the Engagement Uploads to upload files containing financial and governmental unit information on Gateway to allow the SBOA to conduct audit planning and audit processes prior to on-site work at a unit. This remote process will provide for more efficient data processing and save audit costs for our clients.

    A user guide for the Engagement Uploads is available and located at: https://gateway.ifionline.org/userguides/engagementguide It is pertinent that this user guide be used in conjunction with this Directive. It provides critical information to you that will help guide you to uploading the correct documents.

    The following files and governmental unit information are required to be uploaded monthly by all units except as noted:

    • Bank Reconcilements, Bank Statements, and Outstanding Check Lists
    • Approved Board Minutes, please see the user guide for more information and examples
    • Funds Ledger, summarizing total receipts, disbursements, and beginning and ending balances by fund

    For County Auditors:

    • Approved Board Minutes, please see the user guide for more information and examples
    • Funds Ledger, summarizing total receipts, disbursements, and beginning and ending balances by fund
    • Documentation of Reconciliation of Form 61 between Auditor and Treasurer

    For County Treasurers:

    • Cash Balance Reports,
    • Bank Reconcilements, Bank Statements, and Outstanding Check List
    • Documentation of Reconciliation of Form 61 between Auditor and Treasurer

    For County Clerks, Recorders, and Sheriffs:

    • Cash Balance Reports,
    • Bank Reconcilements, Bank Statements, and Outstanding Check Lists

    The following files and governmental unit information are required to be uploaded annually (for Counties, these apply to County Auditors unless otherwise noted):

    • Year-end Investment Statements (for Counties - County Treasurer)
    • Detail of Receipts for the year
    • Detail of Disbursements for the year
    • Current year Salary Ordinance (or Schedule) and Amendments (except Schools)
    • Annual Vendor History Report
    • Annual Payroll History Report, without social security numbers
    • Annual Funds Ledger, summarizing year-to-date total receipts, year-to-date disbursements, and beginning and ending balances by fund
    • Additionally, for Schools only: School Lunch Prepaid Account Balance Report as of June 30 and Approved Salary Schedule for Noncertified Employees and Amendments
    • Additionally, for County Sheriff only: Inmate Trust Fund Subsidiary Detail as of December 31
    • Additionally, for County Clerk and Cities/Towns with courts: Court Trust Fund Subsidiary Detail as of December 31.
    • Optional: Excel Data Capture/Data Dump (in lieu of Detail of Receipts and Disbursements)

    In addition to the monthly and annual files, additional records, known as "Direct Request Uploads," must be uploaded when required by the SBOA. This process is discussed in the user guide described below.

    If you have questions, please refer to the user guide for the Engagement Uploads located at: https://gateway.ifionline.org/userguides/engagementguide. If, after consulting the user guide, you still have questions, please contact the helpdesk at gateway@sboa.in.gov.

    Exceptions to certain requirements set forth in this Directive, such as for manual records, units audited by private CPA firms, and other exceptions, are discussed in the user guide. Contact information for questions and other help, including a "Frequently Asked Questions" section, is also available on the user guide.

    More information is available on the SBOA website by clicking the Political Subdivisions link on the left hand menu and then by selecting the appropriate unit type. Then scroll down and select the Gateway section and the Gateway Upload Application link.

    This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or a Deputy State Examiner.

    STATE EXAMINER DIRECTIVE 2018-2


    Date:        December 20, 2018

    Subject:    Motor Vehicle Highway Account

    Authority:     IC 5-11-1-2, -9, -10, -21, -24; IC 8-17-4.1-2, -3, -4, -6

    Application:    This Directive applies to all local governmental units that receive distributions from the Motor Vehicle Highway Account

    From:         Paul D. Joyce, CPA, State Examiner


    The purpose of this Directive is to authorize and require counties, cities, and towns that receive distributions from the State Motor Vehicle Highway Account to create a new sub-fund within the MVH Fund to properly manage and account for the usage restrictions that were included in House Enrolled Act 1002-2017 and House Enrolled Act 1290-2018.

    The sub-fund will be referred to throughout this Directive as “MVH Restricted” and will be used to account for MVH monies which have been statutorily restricted for construction, reconstruction, and preservation purposes.

    On the chart of accounts, the MVH Fund and MVH Restricted sub-fund shall be shown as follows:

    Counties

    Fund 1176    MVH
    Fund 1173    MVH Restricted

    Cities and Towns

    Fund 201    MVH
    Fund 203    MVH Restricted

    Together, MVH and MVH Restricted shall constitute the total MVH Fund.  MVH and MVH Restricted will be shown separately on the Annual Financial Report and Annual Operational Report.

    Starting on January 1, 2019, the political subdivision must post at the time of receipt of the distribution from the State Motor Vehicle Highway Account fifty percent (50%) of the distribution to MVH Restricted.

    The political subdivision, by ordinance or resolution, may elect to allocate more than fifty percent (50%) of the distributions to MVH Restricted.  During the same fiscal year, the political subdivision may transfer, by ordinance or resolution, the amount allocated in excess of the 50% requirement from MVH Restricted to MVH.  In no event can any transfers from MVH Restricted to MVH reduce the fiscal year distributions from the State Motor Vehicle Highway Account below the 50% requirement for MVH Restricted.

    Any amounts allocated in excess of the required 50% of distributions which remain in MVH Restricted at the end of the fiscal year must remain in MVH Restricted until expended for construction, reconstruction, or preservation.

    Qualified expenditures will then be entered accordingly to MVH and MVH Restricted:

    MVH:  Permissible uses of the State Motor Vehicle Highway (MVH) Account distributions are outlined in Indiana Code 8-14-1-4 for counties and in Indiana Code 8-14-1-5 for cities and towns.

    MVH Restricted:  Effective July 1, 2018, Indiana Code 8-14-1-4(b) and Indiana Code 8-14-1-5(c) requires at least 50% of the MVH distributions to be used for construction, reconstruction and preservation of the unit’s highways.  (Maintenance expenditures no longer count toward the 50% requirement.)

    Accounting for distributions from the State Motor Vehicle Highway Account in MVH and MVH Restricted will promote the transparency and accountability of public funds. This will also assist counties and municipalities with more than 15,000 residents in completing and filing the Annual Operational Report required under Indiana Code 8-17-4.1.

    This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or a Deputy State Examiner.

  • 2017

    Directive 2017-1, CAFR Audits - Rescinded May 6, 2021

  • 2016

    Directive 2016-1, GAAP Annual Financial Reports

    Directive 2016-2, Internal Control Policy and Training for Judicial Circuit

    AMENDED STATE EXAMINER DIRECTIVE 2016-1

    Date:             August 25, 2020

    Subject:        GAAP Annual Financial Reports Required for Issuance of Bonds

    Authority:      Ind. Code § 5-1-11.5-2; Ind. Code § 5-1-11.5-3; Ind. Code § 5-1-11.5-4

    Application:   This Directive applies to all counties, municipalities, and schools who issue bonds

    From:  Paul D. Joyce, CPA, State Examiner


    House Enrolled Act 1009, enacted in 2017, amended Ind. Code § 5‐1‐11.5 to require certain units to file annual financial reports in accordance with generally accepted accounting principles (GAAP) in order to issue bonds. The relevant code sections state the following:

    Sec. 2. As used in this chapter, "bonds" means any bonds, notes, or other evidences of indebtedness, whether payable from property taxes, other taxes, revenues, fees, or any other source. However, the term does not include notes, warrants, or other evidences of indebtedness that have a maturity of not more than five (5) years and that are made in anticipation of and to be paid from revenues of the school corporation, county, or municipality.

    Sec. 3. This section applies only to a school corporation that has an ADM of more than fifteen thousand (15,000) for the school corporation's most recent fall count. Notwithstanding any other law, a school corporation subject to this section may not issue bonds after August 15, 2020, unless the school corporation has for its preceding budget year prepared an annual financial report using the modified accrual basis of accounting in accordance with generally accepted accounting principles. However, upon request of a school corporation to the state examiner, the state examiner may waive the requirement under this section if the state examiner determines that a waiver is in the best interest of the school corporation.

    Sec. 4. This section applies only to the following:

    (1) A county that has a population of more than one hundred thousand (100,000).

    (2) A municipality that has a population of more than seventy-five thousand (75,000).

    Notwithstanding any other law, a county or municipality subject to this section may not issue bonds after June 30, 2020, unless the county or municipality has for its preceding budget year prepared an annual financial report using the modified accrual basis of accounting in accordance with generally accepted accounting principles. However, upon request of a county or municipality to the state examiner, the state examiner may waive the requirement under this section if the state examiner determines that a waiver is in the best interest of the county or municipality.

    Ind. Code §§ 5‐1‐11.5‐2, 3, 4 (2017).

    I.  Counties and Municipalities

    Counties and municipalities report on a calendar year. Thus, section 4 first applies to the period January 1, 2019 to December 31, 2019. In other words, counties with a population greater than one hundred thousand (100,000) and municipalities with a population greater than seventy‐five thousand (75,000) may not issue bonds after June 30, 2020 unless they file with the State Examiner on or before March 1, 2020,1 an annual financial report prepared in accordance with GAAP in a Governmental Accounting Standards Board (GASB) reporting format for the period January 1, 2019 to December 31, 2019. A county or municipality subject to these provisions must submit a cash basis financial report into Gateway by March 1. SBOA will then grant an automatic extension of 90 days for the submission of GAAP financial statements. Once financial statements have been reported in a GASB format, all future years’ reporting will be required to be in a GASB format as well.

    II. Schools

    Schools may budget on either a calendar year or a fiscal year. Section 3 applies to calendar year budgets beginning with January 1, 2019 to December 31, 2019 or fiscal year budgets beginning with July 1, 2019 to June 30, 2020.

    For bond issuance after August 15, 2020, the financial information due to be submitted to the State Board of Accounts via Gateway by August 29, 2020 must include GAAP financial statements in a GASB report format for the fiscal year July 1, 2019 to June 30, 2020. A school corporation subject to these provisions must submit a cash basis annual financial report in Gateway by August 29. SBOA will then grant an automatic extension of 90 days for the submission of GAAP financial statements. Once financial statements have been reported in a GASB format, all future years’ reporting will be required to be in a GASB format as well.

    III.    Waiver Requests

    Waivers to the statutory requirement for GAAP financial statements will only be granted in the most extraordinary circumstances. The mere foreknowledge and acknowledgement that financial statements will not meet any or some of the GAAP requirements is not a sufficient basis for a waiver. In most instances where complete GAAP statements cannot be provided, a qualified opinion of the financial statements will acknowledge those deficiencies. At the very least for consideration of waiver, it must be shown that there is in place a process to prepare GAAP statements in GASB format. All waiver requests must be in writing and provide a detailed explanation why a waiver is requested, including what steps, if any, have been taken by the county, municipality, or school corporation to comply with generally accepted accounting principles for financial accounting and reporting. The waiver request must be submitted at least sixty (60) days prior to the end of the calendar year, or November 1, for counties and municipalities, and May 1 for school corporations . Waiver requests may be sent via e‐mail to waiverrequest@sboa.in.gov, or by U.S. Mail to the following address:

    State Board of Accounts
    Attn: GAAP Waiver Request
    302 West Washington Street, Room E418
    Indianapolis, IN 46204

    All waiver requests will be approved or denied by the State Examiner in writing within thirty (30) days of receipt of the request.

    If a waiver request is granted, it will be effective for one (1) year only.

    This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or a Deputy State Examiner.

    STATE EXAMINER DIRECTIVE 2016-2

    Date:               June 27, 2016

    Subject:           Internal Control Policy and Training for Judicial Circuit

    Authority:         IC 5-11-1-27

    Application:     This Directive applies to all judicial circuit judges, prosecutors, and counties

    From:  Paul D. Joyce, CPA, State Examiner

    State Board of Accounts recognizes that judges and prosecuting attorneys under the judicial circuit have the power to adopt rules for conducting the business of their respective courts or offices. It is our position that judges and prosecuting attorneys may adopt their own internal control policy in compliance with IC 5-11-1-27(g), be responsible to ensure that appropriate personnel, as defined in IC 5-11-1-27(c), receive internal control training, and maintain the required training certification for each individual employee.

    If the judge or prosecuting attorney so elects to take on these responsibilities, the county auditor must be informed and be provided the necessary information to enable the county auditor to properly certify at the time of the annual report submission. If the judge or prosecuting attorney elects not to take on these responsibilities, then by default these responsibilities fall to the county officials as designated in statute.

    Judges and prosecuting attorneys must be cognizant that there are points of intersection between their offices and the county and that in these instances there must be cooperation so that all parties are in compliance with internal control standards.

    This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or a Deputy State Examiner.

  • 2015

    Directive 2015-1, Moving Traffic Violations

    Directive 2015-2, Engagement of a Private Examiner

    Directive 2015-3, Form 100 R - Hospitals - Rescinded July 1, 2016

    Directive 2015-4, Audits and Examinations - GAAP Basis

    Directive 2015-5, School Fees and Textbook Assistance

    Directive 2015-6, Materiality Threshold for Reporting Irregular Variances, Losses, Shortages, and Thefts

    STATE EXAMINER DIRECTIVE 2015-1

    Effective Date: January 21, 2015

    General Subject:  Moving Traffic Violations

    Authority: IC 5-11-1-10; IC 5-11-1-21; IC 35-44.2-1-7

    Application: This Directive applies to all elected and appointed public officials of cities, towns, and counties.

    All cities, towns, and counties collecting fines for moving traffic violations must refer such matters to the local prosecuting attorney or a city, town, or county court for infraction and ordinance violation enforcement proceedings as required by law. Specifically, Indiana Code § 36-1-6-3 states the following (emphasis added):

    1. Certain ordinances may be enforced by a municipal corporation without proceeding in court through:
      • an admission of violation before the violations clerk under IC 33-36; or
      • administrative enforcement under section 9 of this chapter.
    2. Except as provided in subsection (a), a proceeding to enforce an ordinance must be brought in accordance with IC 34-28-5, section 4 of this chapter, or both.
    3. An ordinance defining a moving traffic violation may not be enforced under IC 33-36 and must be enforced in accordance with IC 34-28-5.

    The accounts of each public official and public office should reflect the proper treatment of fines collected for moving traffic violations as required by Indiana Code § 36-1-6-3(c), Indiana Code Ch. 34- 28-5, and this Directive. Failure to do so will result in a civil action against those public officials who are responsible for the improper enforcement and collection of fines for moving traffic violations as allowable by law.

    This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or a Deputy State Examiner.

    AMENDED STATE EXAMINER DIRECTIVE 2015-2

    Date:               April 7, 2016

    Subject:           Engagement of Private Examiners

    Authority:         Ind. Code §§ 5-11-1-7, 10, 24; Ind. Code Chs. 25-2.1-3, 4, 5; Ind. Code § 25-2.1- 12-3

    Application:     This Directive applies to all audited entities subject to examination under Ind.  Code Ch. 5-11-1.

    From:              Paul D. Joyce, CPA, State Examiner

    Indiana Code Ch. 5-11-1 contains several provisions regarding the engagement of a private examiner. First, the State Examiner may allow the engagement of a private examiner to the extent the State Examiner determines necessary to satisfy the requirements of Ind. Code Art. 5-11. Ind. Code § 5-11-1-7(b). Second, a private examiner is subject to the direction of the State Examiner while performing examinations under Ind. Code Art. 5-11. Id. Third, if the State Examiner authorizes the engagement of a private examiner to perform an examination under Ind. Code Art. 5-11, the examination and report must comply with the uniform compliance guidelines established by the State Board of Account under Ind. Code § 5-11-1-24(a). Ind. Code § 5-11-1- 24(d). Fourth, if an audited entity subject to examination under Ind. Code Ch. 5-11-1 engages a private examiner, the contract with the private examiner must require the examination and report to comply with the uniform compliance guidelines established by the State Board of Accounts. Id. Finally, if proposals for performing a private examination of an audited entity are required, an entity may not request such proposals unless the request has been submitted to and approved by the State Board of Accounts first. Ind. Code § 5-11-1-24(e). In addition, uniform compliance guidelines require that contracts agreed upon between an audited entity and a private examiner be submitted to and approved by the State Board of Accounts. See Ind. Code § 5-11-1-24(d); Guidelines for the Audits of Charter Schools Performed by Private Examiners; Uniform Compliance Guidelines for Audit of Hospitals and State and Local Governments by Authorized Independent Public Accountants; and Uniform Compliance Guidelines for Examination of Entities Receiving Financial Assistance From Governmental Sources.

    A private examiner engaged under Ind. Code § 5-11-1-7 must hold (1) a valid certificate for a certified public accountant (CPA) or public accountant issued or renewed under Ind. Code Chs. 25-2.1-3 or 4, and (2) a permit issued under Ind. Code Ch. 25-2.1-5 in order to provide applicable reports on financial or attested statements of an audited entity. Individuals and firms  not holding a valid CPA or public accountant certificate and permit are prohibited from issuing a report conventionally used by licensees with respect to: (1) a review of financial statements and (2) a compilation of financial statements. Ind. Code § 25-2.1-12-3.

    In summary, before engaging a private examiner, an audited entity must: (1) obtain the prior approval of the State Examiner, (2) submit any required requests for proposals to the State Board of Accounts for approval prior to issuing the requests, (3) ensure the contract with the private examiner requires the examination and report to comply with the uniform compliance guidelines established by the State Board of Accounts, (4) submit the agreed upon contract for approval by the State Board of Accounts, and (5) ensure that the private examiner has the required certificate and permit issued under Ind. Code Chs. 25-2.1-3, 4, and/or 5. Failure to follow the steps outlined above will prevent the accountant from being considered a private examiner engaged under Ind. Code § 5-11-1-7.

    This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or a Deputy State Examiner.

    AMENDED STATE EXAMINER DIRECTIVE 2015-4

    Effective Date: January 20, 2021

    General Subject: Audits and Examinations of Financial Statements Prepared on the GAAP (Generally Accepted Accounting Principles) Basis

    Authority: IC 5-11-1; IC 5-11-1-30

    Application: This Directive applies to all audited entities subject to examination under IC 5-11-1, except the State, Universities, and any audited entity required to present GAAP statements under IC 5-1-11.5

    From: Paul D. Joyce, CPA, State Examiner

    Because the State Board of Accounts is dedicated to providing the audit and attest services needed by the taxpayers and local governments, it is and will remain our policy to audit or examine financial statements based on Generally Accepted Accounting Principles (GAAP) provided by the local government for that purpose.

    We encourage those governments that foresee a benefit to GAAP statements to maintain their records in accordance with GAAP and prepare full GAAP statements for audit.

    If an audited entity prefers financial reporting based on GAAP, the audited entity must adopt a resolution by the legislative body approving the request of the State Board of Accounts to examine the financial statements prepared in accordance with GAAP. The State Board of Accounts will approve the request and our opinion will be given on the GAAP statements presented, if all the following requirements are met:

    1. The request is made to the State Board of Accounts within sixty (60) days after the effective date of this Directive for periods ending December 31, 2020, or sixty (60) days after the close of the fiscal year for any subsequent period, and
    2. The audited entity presents the financial statements to the State Board of Accounts within five (5) months after the close of the last year covered in the financial statements.

    The request may be made by forwarding the resolution to the following email address:

    Counties – counties@sboa.in.gov
    Cities or Towns – cities.towns@sboa.in.gov
    Schools or Townships – schools.townships@sboa.in.gov
    Libraries – libraries@sboa.in.gov
    Other Special Districts – specialdistricts@sboa.in.gov

    The State Board of Accounts will approve or disapprove the request within 60 days of receipt of the request.

    Audited entities not approved will have an audit or examination of the regulatory statements presented through Gateway.

    STATE EXAMINER DIRECTIVE 2015-5

    Effective Date: August 19, 2015

    General Subject: School Fees and Textbook Assistance

    Authority: IC 5-11-1-2; IC 5-11-1-10; IC 5-11-1-21; IC 20-33-5-3; IC 20-33-5-11

    Application: This Directive applies to all public school corporations

    Public school corporations may not charge and collect fees for curricular materials, supplies, and other class fees from a child whose parent meets the eligibility standard for financial assistance. Indiana Code § 20-33-5-3 states the following:

    1. If a parent of a child or an emancipated minor who is enrolled in a public school, in kindergarten or grades 1 through 12, meets the financial eligibility standard under section 2 of this chapter, the parent or the emancipated minor may not be required to pay the fees for curricular materials, supplies, or other required class fees. The fees shall be paid by the school corporation that the child attends.
    2. The school corporation may apply for a reimbursement under section 7 of this chapter from the department of the costs incurred under subsection (a).
    3. To the extent the reimbursement received by the school corporation is less than the rental fee assessed for curricular materials, the school corporation may request that the parent or emancipated minor pay the balance of this amount.

    Even if a parent fails to meet the eligibility standard for financial assistance, public school corporations cannot withhold curricular materials, supplies, grades, or any other benefit because of a parent’s failure to pay required fees. Indiana Code § 20-33-5-11 explains:

    1. A school corporation may not:
      • withhold curricular materials and supplies;
      • require any special services from a child; or
      • deny the child any benefit or privilege;
      • because the parent fails to pay required fees.
    1. Notwithstanding subsection (a), a school corporation may take any action authorized by law to collect unpaid fees from parents who are determined to be ineligible for assistance, including recovery of reasonable attorney's fees and court costs in addition to a judgment award against those parents.

    The phrase “curricular materials” is defined broadly to encompass “systematically organized material designed to provide a specific level of instruction in a subject matter category.” Ind. Code § 20-18-2-2.7. “Curricular materials” includes, but is not limited to, books; hardware that will be consumed, accessed, or used by a single student during a semester or school year (e.g., computers, iPads, notebooks, power cords, and other physical parts of electronic devices); computer software; and digital content. Id.

    The Indiana Supreme Court has addressed whether certain fees violate the Education Clause in Article 8, Section 1 of the Indiana Constitution. See, e.g., Nagy v. Evansville-Vanderburgh Sch. Corp., 844 N.E.2d 481 (Ind. 2006). The court explained, “Where the legislature--or through delegation of its authority the State Board [of Education]--has identified programs, activities, projects, services or curricula that it either mandates or permits school corporations to undertake, the legislature has made a policy decision regarding exactly what qualifies as a part of a uniform system of public education commanded by Article 8, Section 1 and thus what qualifies for funding at public expense.” Id. at 492.

    The accounts of each public school corporation should reflect the proper treatment of fees charged and/or collected for curricular materials, supplies, other class fees, and rental changes as required by IND. CONST. Art. 8, § 1; Ind. Code § 20-33-5-3; Ind. Code § 20-33-5-11; and this directive. Failure to comply with this directive may result in an audit finding, audit charge, and/or request for enforcement action pursuant to Ind. Code § 5-11-1-10 or Ind. Code § 5-11-1-21.

    This directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or a Deputy State Examiner.

    AMENDED STATE EXAMINER DIRECTIVE 2015-6

    Date:                 April 7, 2016

    Subject:            Materiality threshold for reporting irregular variances, losses, shortages, and thefts

    Authority:          Ind. Code § 5-11-1-10; Ind. Code § 5-11-1-21; Ind. Code § 5-11-1-27

    Application:      This Directive applies to all political subdivisions

    From:               Paul D. Joyce, CPA, State Examiner

    For purposes of this directive, “political subdivision” means all counties, townships, cities, towns, school corporations, library districts, fire protection districts, public transportation corporations, local hospital authorities or corporations, local airport authority districts, special service districts, special taxing districts, and other separate local governmental entities that may sue and be sued. Ind. Code § 5-11-1- 27(d); Ind. Code § 5-11-10.5-1.

    Indiana Code § 5-11-1-27(j) states:

    All erroneous or irregular material variances, losses, shortages, or thefts of political subdivision funds or property shall be reported immediately to the state board of accounts. For all material variances, losses, shortages, or thefts, the state board of accounts shall:

    1. determine the amount of funds involved and report the amount to the appropriate government and law enforcement officials;
    2. determine the internal control weakness that contributed to or caused the condition; and
    3. make written recommendations to the appropriate legislative body or appropriate official overseeing the internal control system addressing:
      • the method of correcting the condition; and
      • the necessary internal control policies and internal control procedures that must be modified to prevent a recurrence of the condition.

    A. Materiality Threshold for Political Subdivisions.

    In general, each political subdivision must develop their own policy on materiality because the causes of irregular variances, losses, shortages, and thefts are as broad and varied as the political subdivisions in which the incidents occur. For example, a $500 variance in Fort Wayne is not necessarily as concerning as a $500 variance in Pershing Township, Jackson County. On the other hand, a $100 variance in Fort Wayne that occurs every Friday may be material. Moreover, each political subdivision is the best determiner of the qualitative and quantitative factors unique to the unit in arriving at materiality.

    Political subdivisions must recognize that variances, losses, shortages, and thefts may occur. If an incident occurs, it is imperative that the political subdivision have a policy in place that outlines the steps to be taken. Such a policy must include a materiality threshold at which point the political subdivision reports incidents to the State Board of Accounts.

    The policy must be detailed, and it is essential that materiality thresholds distinguish between incidents involving cash and other types of assets. The policy needs to address maintenance of documentation and resolution of incidents that do not meet the materiality threshold.

    The policy must also consider Ind. Code § 5-11-1-27(l), which requires public officials who have actual knowledge of or reasonable cause to believe that there has been a misappropriation of public funds to immediately send written notice of the misappropriation to the State Board of Accounts and the prosecuting attorney. There is no materiality threshold applicable to Ind. Code § 5-11-1-27(l). Thus, whenever a political subdivision has actual knowledge or is reasonably certain that a misappropriation of public funds has occurred (regardless of the dollar amount), the political subdivision must send written notice of the misappropriation to the State Board of Accounts and the local prosecuting attorney. Misappropriation occurs when an employee or in-house contractor of the political subdivision wrongly takes or embezzles public funds. When there is a known misappropriation or embezzlement of public funds by an internal actor, materiality is irrelevant. Indiana law requires the political subdivision to report the activity to the State Board of Accounts and the local prosecutor. Ind. Code § 5-11-1-27(l).

    If a political subdivision does not develop a policy on materiality, then the threshold is $0.00 and the political subdivision is required to report all irregular variances, losses, shortages, and thefts to the State Board of Accounts.

    B. Procedure to Report Material Variances, Losses, Shortages, and Thefts.

    When an irregular variance, loss, shortage, or theft is determined material pursuant to a political subdivision’s policy on materiality (or, if no policy on materiality is developed, whenever there is any incident of irregular variance, loss, shortage, or theft), the subdivision must report the incident to the State Board of Accounts.

    On the State Board of Accounts’ website there is a notification link, which allows public officials to report via e-mail material irregular variances, losses, shortages, or thefts. Telephone and in-person reporting is also acceptable. Reports will be followed up with a return e-mail or call to gather additional information as necessary. All reports of irregular variances, losses, shortages, or thefts are maintained by the State Board of Accounts.

    When a report is received, the State Board of Accounts will use a qualitative and quantitative analysis to determine materiality for investigative and reporting purposes, as well as written internal control recommendations as required by Ind. Code § 5-11-1-27(j).

    This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or a Deputy State Examiner.

  • 2014

    Directive 2014-1, Exit Conference Confidentiality - Rescinded July 1, 2017

    Directive 2014-2, Indiana Department of Education Form 9

    STATE EXAMINER DIRECTIVE 2014-2

    Effective Date: December 23, 2014

    General Subject: Indiana Department of Education Form 9

    Authority: IC 5-11-1-4; IC 5-11-1-10; IC 5-11-1-21; IC 35-44.2-1-6; IC 35-44.2-1-7

    Application: This Directive applies to all university administered schools, academies, and laboratory schools established under Indiana Code Chapters 20-24.5-1, 2, and 3 that receive public tuition assistance.

    From: Paul D. Joyce, CPA, State Examiner

    All university administered schools, academies, and laboratory schools established under Indiana Code Chapters 20-24.5-1, 2, and 3 that receive public tuition assistance shall file complete and correct Indiana Department of Education Form 9 Reports for each required 6-month period. The reports serve as the annual report for university administered schools, academies, and laboratory schools, and are required by the State Examiner pursuant to Indiana Code Section 5-11-1-4(a). Any deficiencies in the Form 9 report, as described and communicated by the Indiana Department of Education, must be immediately corrected and re-submitted as instructed.

    This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner of a Deputy State Examiner.

  • 2020

    Directive 2020-1, Timely Deposits and the Claims Process - Rescinded April 7, 2021

    Directive 2020-2, Application for Township Assistance

    Directive 2020-3, Accounting for CARES Money Administered by Indiana Finance Authority (IFA)

    Directive 2020-4, Independent Public Accountants' Qualifications to Serve as a Private Examiner

    STATE EXAMINER DIRECTIVE 2020-2

    Date: March 20, 2020

    Subject: Application for Township Assistance

    Authority: IC 5-11-1-2; IC 12-20-6-1

    Application: This Directive applies to all Township Trustees

    From: Paul D. Joyce, CPA, State Examiner

    State Examiner Memorandums titled Policy Regarding Corona Virus dated March 12, 2020, and Corona Virus Items to Consider dated March 16, 2020, are hereby incorporated by reference into this Directive.

    During the time of this Public Health Emergency, Township Trustees may need to adjust normal procedures used to complete and document the Application for Township Assistance (Township Form TA-1) and the Application for Additional or Continuing Township Assistance (Township Form TA-!B).

    Indiana Code 12-20 governs Township Assistance and is still in effect during the Public Health Emergency. However, the State Board of Accounts will not take audit exception to the Township Trustee or designated deputy assisting the applicant in the completion of the Application for Township Assistance or the Application for Additional or Continuing Township Assistance by telephone or other digital methods.

    In addition, the State Board of Accounts will not take audit exception to the following alternative procedures regarding applicant signature lines on the Application for Township Assistance.

    Notice of Public Law. If the applicant cannot provide a signature or electronic confirmation that the applicant has read the Notice of Public Law, the township trustee or designated deputy may read the Notice of Public Law to the applicant by telephone. The township trustee or designated deputy must indicate on the Signature of Applicant line: I, [name], Township Trustee/deputy of ________ Township read the Notice of Public Law to the applicant by telephone.” The Township Trustee/deputy should affix his or her signature to this statement.

    Affidavit. If the applicant cannot provide a signature or electronic confirmation of the certifications required in the Affidavit section, the township trustee or designated deputy may read the Affidavit to the applicant by telephone. The township trustee or designated deputy must receive an affirmative answer from the applicant for each certification contained in the Affidavit section. The township trustee or designated deputy must indicate on Signature of Applicant line: “The applicant affirmed each statement contained in the Affidavit to me, Township Trustee/deputy of ___ Township, by telephone.” The Township Trustee/deputy should affix his or her signature to this statement.

    Also, the State Board of Accounts will not take audit exception to the following alternative procedures regarding applicant signature lines on the Application for Additional or Continuing Township Assistance.

    Affidavit. If the applicant cannot provide a signature or electronic confirmation of the certifications required in the Affidavit section, the township trustee or designated deputy may read the Affidavit to the applicant by telephone. The township trustee or designated deputy must receive an affirmative answer from the applicant for each certification contained in the Affidavit section. The township trustee or designated deputy must indicate on Signature of Applicant line: “The applicant affirmed each statement contained in the Affidavit to me, Township Trustee/deputy of ___ Township, by telephone.” The Township Trustee/deputy should affix his or her signature to this statement.

    This Directive will be rescinded upon Declaration by the Governor that the Public Health Emergency has ended.

    STATE EXAMINER DIRECTIVE 2020-3

    Date: October 22, 2020

    Subject: Accounting for CARES Money Administered by Indiana Finance Authority (IFA)

    Authority: IC 5-11

    Application: This Directive applies to all local governmental units receiving CARES money administered through IFA

    From: Paul D. Joyce, CPA, State Examiner

    The purpose of this Directive is to clarify prescribed accounting procedures for federal assistance received from the Coronavirus Relief Fund created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and administered through the Indiana Finance Authority (IFA).

    Each local unit of government that receives an allocation from the Coronavirus Relief Fund administered by IFA shall establish a separate CARES grant fund with a fund number consistent with memorandum Accounting and Appropriation of COVID-19 Grants, April 29, 2020 (updated September 29, 2020).

    All Reimbursements received from IFA shall be receipted into a separate CARES grant fund that is specific to IFA reimbursements.

    Reimbursed Public Health and Safety Payroll Costs

    Transactions for public health and safety payroll costs must be accounted for through one of these two prescribed options.

    Option One. Reimbursements received from IFA shall be receipted into the separate CARES grant fund. The reimbursed amount for public health and safety payroll costs originally incurred in the general fund (or other fund) will be moved to the separate CARES grant fund through a reversing entry. This action will reinstate the general fund (or other fund) cash balance and re-appropriate the general fund (or other fund) in a similar manner to IC 6-1.1-18-9(1) for those disbursements. This reversal must be done in the same budget year that the original transaction was posted.

    Once the disbursement is reversed within the general fund (or other fund), it must be posted as a disbursement in the separate CARES grant fund. Documentation must be maintained so the audit trail can be followed. The accounting system must tie the original claim for the disbursement to the separate CARES grant fund by specific reference or notation in a comment section.

    Once option one is completed, the cash balance of the separate CARES grant fund will be zero. No money shall remain in the separate CARES grant fund.

    EXAMPLE

    1. A city has public health and safety payroll costs for the period March 1, 2020 to September 30, 2020 totaling $650,000 – all paid out of general fund appropriations as follows: Salaries $475,000; Overtime $25,000; Benefits $150,000. The city receives a reimbursement from IFA for the total paid - $650,000.Under Option One, the city receipts the reimbursement into the separate CARES fund, which at the time of posting had a cash balance of $0. The city reverses the original entries out of general fund and posts the disbursements to the separate CARES fund. Reversing the entries out of general fund for posting in the CARES fund increases, or re-appropriates, the amounts to salaries, overtime, and benefits in general fund as well as the general fund cash balance. The resulting receipt and disbursement posting to the CARES fund results in a $0 cash balance to the CARES fund.

    Option Two. Reimbursements received from IFA shall be receipted into the separate CARES grant fund.

    A claim will be created against the separate CARES grant fund for the reimbursed amount in favor of the general fund. This claim must be supported by documentation of the public health and safety payroll costs that have been expensed from the general fund or other funds.

    The amount of the claim will be receipted into the general fund cash balance. Normal appropriation procedures will apply to these funds.

    Once option two is completed, the cash balance of the separate CARES grant fund will be zero. No money shall remain in the separate CARES grant fund. This option requires a resolution or ordinance as detailed in the memorandum CARES Reimbursement of Public Health and Safety Payroll Costs, September 30, 2020.

    EXAMPLES

    1. A city has public health and safety payroll costs for the period March 1, 2020 to September 30, 2020 totaling $650,000 – all paid out of General fund appropriations as follows: Salaries $475,000; Overtime $25,000; Benefits $150,000. The city receives a reimbursement from IFA for the total paid - $650,000.
      Under Option Two, council had previously adopted an ordinance to transfer reimbursed payroll costs to the general fund. The city receipts the reimbursement into the separate CARES fund and the governing body approves a claim to pay general fund $650,000. Council then appropriates the $650,000 in the general fund following the normal appropriation procedures. The resulting receipt and disbursement posting to the separate CARES fund results in a $0 cash balance as the fund had a $0 balance prior to this transaction.
    2. A city has public health and safety payroll costs for the period March 1, 2020 to September 30, 2020 totaling $750,000 paid out of two funds – general fund and public safety LIT fund. Of that amount, $650,000 was paid out of general fund appropriations under Salaries $475,000; Overtime $25,000; and Benefits $150,000. The remaining $100,000 was paid out of public safety LIT from appropriations for Salaries $75,000; Overtime $15,000; and Benefits $10,000. The city receives a reimbursement from IFA for the total paid - $750,000. Under Option Two, council had previously adopted an ordinance to transfer reimbursed payroll costs to the general fund. The city receipts the reimbursement into the separate CARES fund and the governing body approves a claim to pay general fund $750,000. Council then appropriates the $750,000 in the general fund following the normal appropriation procedures. The resulting receipt and disbursement posting to the separate CARES fund results in a $0 cash balance as the fund had a $0 balance prior to this transaction.

    Reimbursed Costs Other than Public Health and Safety Payroll Costs

    Transactions for other permitted costs reimbursed by IFA must be accounted for through one of the following prescribed frameworks.

    Framework One. Reimbursements received from IFA shall be receipted into the separate CARES grant fund. Reimbursed disbursements originally incurred in another fund will be moved to the separate CARES grant fund through a reversing entry. This action will reinstate the fund cash balance and re-appropriate the fund in a similar manner to IC 6-1.1-18-9(1) for those disbursements. This reversal must be done in the same budget year that the original transaction was posted.

    Once the disbursement is reversed within the original fund, it must be posted as a disbursement in the separate CARES grant fund. Documentation must be maintained so the audit trail can be followed. The accounting system must tie the original claim for the disbursement to the separate CARES grant fund by specific reference or notation in a comment section.

    Once these steps are completed, the balance of the separate CARES grant fund will be zero. No money shall remain in the separate CARES grant fund.

    EXAMPLE

    The unit purchases equipment to hold virtual public meetings in the amount of $5,000. The original expense is paid out of the general fund. The unit submits a reimbursement request to IFA and receives $5,000. The reimbursement is receipted into the separate CARES grant fund, which will then show a balance of $5,000. In order to tie the expense to the separate CARES grant fund, the unit reverses the $5,000 expense in the general fund, which reinstates the expense appropriation line item and the cash balance of the general fund. The unit then posts the $5,000 disbursement to the separate CARES grant fund with a link to the original claim and supporting documentation, bringing the balance of the separate CARES grant fund to zero.

    Framework Two. If IFA has provided reimbursement based on unpaid invoices or purchase orders, then reimbursements received from IFA shall be receipted into the separate CARES grant fund. The expenditures to vendors will be made through the CARES grant fund and these expenditures must match the application made to IFA. If the actual invoice or invoices relating to a purchase order is less than the purchase order, then the difference in the money expended to the vendor and the amount received for the purchase order from IFA must be returned to IFA. The items on the invoice must match the items on the purchase order. All documentation must be maintained.

    Once these steps are completed, the balance of the separate CARES grant fund will be zero. No money shall remain in the separate CARES grant fund.

    EXAMPLE

    A unit orders emergency radios for $10,000 and submits the reimbursement request to IFA before the payment is made for the radios. IFA reimburses the $10,000 and the unit receipts the $10,000 into the separate CARES grant fund, which will now have a $10,000 balance. The unit decides to purchase fewer radios and makes payment to the vendor for $8,000, leaving a balance of $2,000 in the separate CARES grant fund. The $2,000 must be returned to IFA bringing the balance to zero.

    Framework Three. If you have created a negative balance in your CARES fund based on expenditures made in anticipation of receipt of reimbursement for allowable expenditures where invoices have already been submitted to IFA then leave as is and receipt reimbursement when received, bringing the balance in the separate CARES grant fund to zero. Going forward, expend any anticipated allowable expenditures from a fund with an appropriation and follow framework one. If a negative balance in the CARES grant fund is not fully reimbursed, then the unreimbursed amount will require a reverse entry and posting of the expenditure to the general or other appropriate fund within an appropriated line item.

    Once these steps are completed, the balance of the separate CARES grant fund will be zero. No money shall remain in the separate CARES grant fund.

    EXAMPLE

    A unit purchases $5,000 of PPE and posts the expense directly to the separate CARES grant fund, incurring a negative balance of $5,000. The unit submits a reimbursement request to IFA for $5,000, but IFA only reimburses $4,500. The unit receipts the $4,500 into the separate CARES grant fund, which leaves a negative balance of $500. The unit reverses the expense entry for the unreimbursed amount and posts the expense to the general fund, bringing the balance in the separate CARES grant fund to zero.

    These prescribed accounting procedures will promote transparency and accountability of funds received through the Coronavirus Relief Fund created by the CARES Act and administered through IFA.

    This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or Deputy State Examiner.

    STATE EXAMINER DIRECTIVE 2020-4

    Date: November 30, 2020

    Subject: Independent Public Accountants' Qualifications to Serve as a Private Examiner

    Authority: IC 5-11-1-7; IC 5-11-1-24

    Application: This Directive applies to all political subdivisions, entities, and private examiners/independent public accountants.

    From: Paul D. Joyce, CPA, State Examiner

    All independent public accountants (IPAs) engaged by the State Examiner or allowed to be engaged in accordance with IC 5-11-1-7(b) and other laws, must meet the following qualifications:

    1. Be a certified public accountant (CPA) and licensed to practice in the State of Indiana or have a CPA license from a state that has been determined to be in substantial equivalence with the CPA licensure requirements of the State of Indiana in accordance with IC 25-2.1-4-10(a);
    2. Meet independence requirements of the American Institute of Certified Public Accountants (AICPA) and the Generally Accepted Government Auditing Standards (GAGAS) issued by the Comptroller General of the United States, as applicable;
    3. If performing audits under GAGAS, meet continuing professional education requirements in accordance with Government Auditing Standards issued by the Comptroller General of the United States;
    4. Obtain an external peer review at least once every three years and attain a rating of Pass, or Pass with Deficiencies;
    5. Have no record of performing substandard audits;
    6. Understand and comply with applicable uniform compliance guidelines, policies, and directives established by the State Board of Accounts;
    7. Understand the role of the State Board of Accounts in the audit process and that the IPA is acting as an agent for the State Examiner;
    8. For hospitals, be experienced in hospital matters in accordance with IC 16-22-3-12(c).

    The Director of Procured Audits, acting under the authority of the State Examiner, can determine that an IPA has failed to meet any of the qualifications listed above based on any of the following:

    1. Information received from professional licensing agencies, other governmental agencies, professional organizations, and audit entity personnel;
    2. Results of quality control reviews of the IPA's reports and workpapers conducted by State Board of Accounts personnel;
    3. Results of external peer reviews;
    4. Results of a review of the IPA's history of compliance with uniform compliance guidelines, policies, and directives established by the State Board of Accounts;
    5. Interactions between the IPA and State Board of Accounts personnel that demonstrate that the IPA does not understand the State Board of Accounts' role in the audit process and that the IPA is acting as an agent for the State Examiner; or
    6. Any other matter as determined at the sole discretion of the State Examiner.

    The IPA will be informed in writing of the determination with a provided explanation, and that future contracts for audits that are the statutory responsibility of the State Examiner will not be approved. Further actions may include removing the IPA's audit reports from the State Board of Accounts website and notifying federal and state agencies of the revocation of the IPA's status as a private examiner.

    The IPA may provide documentation to demonstrate its qualification to perform as a private examiner and/or that the issue resulting in its disqualification has been resolved. The State Examiner will inform the IPA in writing that the IPA may be engaged as a private examiner, the actions needed to return to the status of private examiner, or affirmation of the revocation of private examiner status.

    The State Board of Accounts will inform a political subdivision or entity that has contracted with an IPA whose status as a private examiner has been revoked that a future contract will not be approved with such individual or firm.

    This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or a Deputy State Examiner.

  • 2021

    Directive 2021-1, Accounting for American Rescue Plan Act (ARP), Accounting Processes for Subtitle M-Coronavirus State and Local Fiscal Recovery Funds

    Directive 2021-2, GAAP AND ACFR Audits

    Directive 2021-3, Accounting for American Rescue Plan Act (ARP), Accounting Processes for Subtitle M-Coronavirus State and Local Fiscal Recovery Funds

    STATE EXAMINER DIRECTIVE 2021-1

    Date: March 18, 2021

    Subject: Accounting for American Rescue Plan Act (ARP), Accounting Processes for Subtitle M-Coronavirus State and Local Fiscal Recovery Funds

    Authority: IC 5-11

    Application: This Directive applies Counties, Cities, and Towns

    From: Paul D. Joyce, CPA, State Examiner

    The purpose of this directive is to prescribe the accounting procedures for federal assistance received through the American Rescue Plan Act of 2021 (ARP).

    Separate Fund Required. Assistance provided through the ARP must be received into a separate fund. There are many funding provisions in this Act. A separate fund must be established for each separately identified assistance provided with ARP in the naming title.

    The fund name and number for each ARP grant fund must be assigned as follows:

    Counties: ARP [Name of Grant]; Fund Number Range 8950-8975

    Cities and Towns: ARP [Name of Grant]; Fund Number Range 176-199

    ARP Coronavirus Local Fiscal Recovery Fund. Counties, Cities, and Towns will each receive an allocation of Coronavirus State and Local Fiscal Recovery Funds. Each local unit that receives an allocation from the Coronavirus Local Fiscal Recovery Fund under Section 603 of the Social Security Act, as added by Section 9901 of the ARP, shall establish by ordinance a separate local grant fund called the ARP Coronavirus Local Fiscal Recovery Fund within the fund number range described above. For a county, the ARP grant fund must be established by ordinance of the County Commissioners. For a city or town, the ARP grant fund must be established by ordinance of the legislative body. The ordinance must specify the uses of the fund in accordance with the purposes outlined in Section 603(c). The ordinance should reference a plan that will provide the details for the use of these funds. All moneys received from the Local Fiscal Recovery Fund must be receipted into the separate ARP grant fund.

    Before money in the fund is disbursed, the fiscal body must appropriate the money in the fund for a use consistent with Section 603(c) as stated in the adopted ordinance and the plan. Only a local appropriation is needed. To ensure accountability and transparency of the use of these funds, all disbursements must be made from the ARP grant fund; money from the ARP fund may not be transferred to another fund of the county, city, or town.

    A detailed accounting of the fund is required by the ARP. All related expenditure records (accounts payable vouchers, minutes, correspondence, contracts, etc.) must be maintained in a separate file for future audits of ARP funds. It is important that you track every dollar disbursed and maintain supporting documentation for those disbursements. Each disbursement must be directly tied to a use listed in Section 603(c). The grant funding may be used to cover costs incurred by December 31, 2024. It is extremely important that these files be complete and accurate for this time period.

    If your unit chooses to use the ARP funds to cover costs incurred for the provision of governmental services as provided in Section 603(c)(1)(C), you must maintain detailed calculations of the reduction in revenue due to COVID-19. For purposes of this calculation, the most recent full fiscal year prior to the emergency is 2019.

    Note that the use of the funds for the provision of governmental services is limited to the extent of the reduction in revenue due to the COVID-19 public health emergency.

    Other ARP Assistance or Grants. Other assistance or grants may be coming through the ARP. As stated above, each form of assistance or grant must be separately identified and accounted in a separate fund with a fund name and number as described. The Indiana State Board of Accounts will prescribe accounting procedures for these funds as more information becomes available.

    Internal Controls. Sufficient internal controls over all transactions must be in place. Separate funds, maintaining records, detailed comments that provide audit trails, appropriate approvals, etc., are all part of good internal controls.

    These prescribed accounting procedures will promote transparency and accountability of funds received through the Coronavirus Local Fiscal Recovery Fund. This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or Deputy State Examiner.

    STATE EXAMINER DIRECTIVE 2021-2

    Date: May 6, 2021

    Subject: GAAP AND ACFR Audits

    Authority: IC 5-11-1; IC 5-11-1-30

    Application: This Directive applies to all political subdivisions that choose to prepare a Comprehensive Annual Financial Report (ACFR) or GAAP financial statements for audit by the Indiana State Board of Accounts (SBOA)

    From: Paul D. Joyce, CPA, State Examiner

    This Directive supersedes Amended State Examiner Directive 2017-1, which was rescinded on May 6, 2021.

    In support of the Government Finance Officers Association (GFOA) campaign to End the Acronym, the Indiana State Board of Accounts (SBOA) will refer to comprehensive annual financial reports by their full name or by annual comprehensive financial reports (ACFR). These reports are full GAAP financial statements with additional disclosures that are to be submitted to GFOA for consideration of their Certificate of Achievement for Excellence in Financial Reporting (COA). This policy also covers other auditees that provide us with GAAP financial statements for audit whether that is due to Indiana Code requirements or other reasons.

    The purpose of this Directive is to establish procedures and a timeline for: the receipt of GAAP financial statements and supporting documentation; the GAAP pre-audit process; and the assignment of audit teams for ACFR and GAAP engagements, excluding the state audit.

    To perform the audit and required reviews in sufficient time for an on time GFOA submission (6 months after fiscal year end), draft financial statements, including note disclosures, management's discussion and analysis (MD&A), required supplementary information (RSI), and supporting documentation must be sub- mitted to the SBOA office on or before 90 days after fiscal year end. The GAAP financial statements and other information must be complete and reconciled. Submissions should contain the final complete financial statements and schedules that are ready for audit, not a draft. Exceptions may be made for discretely presented component unit information that will be available during the audit fieldwork. Supporting documentation needs to support the calculations made for each amount within the financial statements and other information and should agree to the entity's records. This documentation needs to be submitted via the Monthly and Annual Engagement Uploads application in Gateway.

    Auditees seeking an audit of GAAP financial statements, which will not be submitted to GFOA for COA consideration, whether it is to meet a statutory requirement or voluntarily, should use the same process in Gateway for upload of all required elements of the GAAP financial statements and supporting documentation as described above. Submission should be within 5 months after fiscal year end.

    On-time submission does not guarantee the independent auditor's report by any particular date. It does mean that the SBOA will work with the auditee to plan and perform the audit in a manner that will result in timely completion barring unforeseen issues and circumstances outside of our control. There are circum- stances, such as computer conversion or change in key personnel, that occasionally arise that prevent an on-time submission. The entity's management may discuss a later date for providing the draft financial statements, note disclosures, MD&A, RSI, and supporting documentation referenced above with Tammy White, Deputy State Examiner, in these cases. See contact information below.

    Regardless of the planned submission date of the entity, a team will not be assigned to begin fieldwork until the required financial statements, schedules, and supporting documentation have gone through a pre-audit process and determination has been made that the entity's submission appears complete and reconciled.

    Please contact Tammy White, Deputy State Examiner, at (317) 232-2514 or twhite@sboa.IN.gov with any questions or concerns you have regarding GAAP or ACFR audits.

    STATE EXAMINER DIRECTIVE 2021-3

    Date:   November 23, 2021

    Subject:           Premium Pay under the American Rescue Plan Act

    Authority:       IC 5-11

    Application:    This Directive applies to Counties, Cities, and Towns

    From:  Paul D. Joyce, CPA, State Examiner

    The purpose of this directive is to prescribe audit procedures and expectations related to the provision of Premium Pay under the American Rescue Plan Act (ARPA). It has come to our attention that ARPA money is being used to provide Premium Pay in the form of "bonuses" to government employees. The ARPA and Interim Final Rule (IFR) define Premium Pay as an hourly rate rather than a bonus or stipend. The amount paid to government employees must comply with the definitions and limitations provided in the ARPA and IFR. Noncompliance may be reported as a federal finding and questioned cost in the audit report.

    American Rescue Plan Act. According to the American Rescue Plan Section 603(c)(1)(B):

    Funds may be used for costs incurred "to respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers . . . that are performing such essential work . . ." (our emphasis)

    Definitions. The following definitions apply to this category of expenditure:

    Premium Pay. The term 'premium pay' means an amount of up to $13 per hour that is paid to an eligible worker, in addition to wages or remuneration the eligible worker otherwise receives, for all work performed by the eligible worker during the COVID–19 public health emergency. Such amount may not exceed $25,000 with respect to any single eligible worker. (ARPA Section 602(g)(3) and Section 603(g)(6)

    Eligible Workers. The term 'eligible workers' means those workers needed to maintain continuity of operations of essential critical infrastructure sectors and additional sectors as each chief executive officer of a metropolitan city, nonentitlement unit of local government, or county may designate as critical to protect the health and well-being of the residents of their metropolitan city, nonentitlement unit of local government, or county. (ARPA Section 603(g)(2))

    Essential Work. The term "essential work" means work that: (1) Is not performed while teleworking from a residence; and (2) Involves: (i) Regular in-person interactions with patients, the public, or coworkers of the individual that is performing the work; or (ii) Regular physical handling of items that were handled by, or are to be handled by patients, the public, or coworkers of the individual that is performing the work. (IFR, Federal Register Vol. 86 No. 93 p. 26798)

    Essential Critical Infrastructure Sectors. The term Essential Critical Infrastructure Sectors includes ". . . any work performed by an employee of a State, local, or Tribal government . . ." (IFR, Federal Register Vol. 86 No. 93 p. 26820)

    Limitations. Payments for premium pay are subject to certain limitations:

    1.         Maximum. "The ARPA recognizes this by defining premium pay to mean an amount up to $13 per hour in addition to wages or remuneration the worker otherwise receives and in an aggregate amount not to exceed $25,000 per eligible worker." (IFR, Federal Register Vol. 86 No. 93 p. 26798)

    2.         Work from Home. "A worker would not be engaged in essential work and, accordingly may not receive premium pay, for telework performed from a residence." (IFR, Federal Register Vol. 86 No. 93 p. 26798)

    3.         Comparison to Average Annual Wage. "If premium pay would increase a worker's total pay above 150 percent of their residing state's average annual wage for all occupations, as defined by the Bureau of Labor Statistics' Occupational Employment and Wage Statistics, or their residing county's average annual wage, as defined by the Bureau of Labor Statistics' Occupational Employment and Wage Statistics, whichever is higher, on an annual basis, the State, local, or Tribal government must provide Treasury and make publicly available, whether for themselves or on behalf of a grantee, a written justification of how the premium pay or grant is responsive to workers performing essential worker during the public health emergency." (IFR, Federal Register Vol. 86 No. 93 p. 26798)

    Elected Officials

    Indiana statutes regarding the compensation of elected officials must be followed if ARPA money is used to provide Premium Pay to elected officials.

    For Counties, IC 36-2-5-13(c) states, "Except as provided in subsection (d), the compensation of an elected county officer may not be changed in the year for which it is fixed."

    For Cities, IC 36-4-7-2(c) states, "The compensation of an elected city officer may not be changed in the year for which it is fixed nor may it be reduced below the amount fixed for the previous year."

    For Towns, IC 36-5-3-2(c) states: "The compensation of an elected town officer may not be changed in the year for which it is fixed, nor may it be reduced below the amount fixed for the previous year."

    Based on these statutes, it is our audit position that elected officials for counties, cities, and towns are not eligible for Premium Pay in 2021. If Premium Pay is to be provided to elected officials in 2022, then the amount of Premium Pay must be included in the budget and salary ordinance for 2022 adopted or amended by December 31, 2021.

    Consider that for cities and towns the compensation of an elected official may not be reduced below the amount fixed for the previous year.

    Audit Expectations

    During an audit, we will be reviewing the following items regarding Premium Pay:

    1.         The amount of Premium Pay provided to an employee must be supported by an hourly rate for hours worked; all calculations must be maintained for audit.

    2.         Documentation must be available for audit showing that Premium Pay provided to an employee was for hours worked with regular in-person interaction or physical handling of items, rather than telework from a residence.

    3.         Documentation must be available for audit to show that the amount of Premium Pay provided to an employee did not exceed $13 per hour or the maximum of $25,000 per worker.

    4.         If the amount of premium pay exceeded the 150% of the State or County average annual wage, the written justification for that payment must be provided.

    5.         Premium Pay provided to employees must comply with Indiana statute and be included in the salary ordinance or amended salary ordinance.

    6.         Premium Pay provided to an elected official must be included in the budget and salary ordinance adopted in the previous year.

    7.         Written internal control procedures and evidence of those internal control procedures must be established to provide reasonable assurance that the financial, compliance and reporting objectives for ARPA funds will be achieved.

    8.         The procedures outlined all State Examiner Directives and related memorandums must be followed.

    Other Considerations

    This directive discusses the provision of Premium Pay to employees based on ARPA Section 603(c)(1)(B) and guidance issued by the U.S. Treasury as of the date of this directive. There may be other provisions in ARPA which could be used to provide additional compensation to employees, such as the provision of government services to the extent of the reduction of revenue in Section 603(c)(1)(C). The provisions in the ARPA and applicable Indiana statutory provisions must be followed. If ARPA money is used to provide premium pay to elected officials, the corresponding Indiana statutes regarding the compensation of elected officials will apply.

    If you have any concerns about the provision of Premium Pay, please contact the Directors for your unit:

    Counties: Lori Rogers or Ricci Hofherr counties@sboa.in.gov

    Cities and Towns: Todd Caldwell or Susan Gordon cities.towns@sboa.in.gov

    You must maintain documentation and explanation that the premium pay meets the definitions of the ARPA and the IFR. Any payments that are not in compliance with the ARPA or IFR may be identified as a federal finding and questioned cost in the audit report.

    This Directive may be amended from time to time and may be rescinded at any time in writing by the State Examiner or Deputy State Examiner.